The one-stop chip customization business maintained growth, but the fluctuation of IP business dragged down the performance core shares to release three quarterly results in 2023: Q3 realized revenue of 581 million yuan, down 13.5% from the same period last year and 9.9% from the previous year; net profit from home was-156 million yuan, down 174 million yuan from the same period last year and 250 million yuan from the previous year, mainly due to fluctuations in IP business and obvious increase in fees. Taking into account the increase in the company's investment in strategic R & D projects and personnel, we reduce our annual return net profit forecast for 23-24-25 to-1.17pm 0.20pm (previous value: 076pm 1487m). Respectively give the chip customization / IP authorization business 12.0x30.0x 23e PS valuation (comparable company consistent expected average 6.4x/18.2x, the premium is mainly based on the core original A-share scarcity, and has a significant competitive advantage in the HPC/AI field), adjust the target price to 81.73 yuan (previous value: 102.00 yuan), maintain the purchase.
IP business: Q3 seasonal fluctuation, long-term optimistic company AI related IP revenue growth Q3 company achieved IP license fee income of 122 million yuan, a month-on-month decrease of 55.0%, a year-on-year decrease of 43.8%, there is a large seasonal fluctuation, intellectual property license fees decreased significantly (- 61.7%).
The number of IP authorizations and the royalties for a single IP authorization have decreased compared with the previous month. But in the medium to long term, we believe that core will continue to benefit from the AIGC wave and Chiplet trend. Core original NPU IP has been used in 120 + artificial intelligence chips by 68 customers, establishing a leading position in the field of AI IP.
The demand for AI-related IP with advantages such as GPGPU/NPU IP is expected to maintain the growth trend. 1H23's GPU/NPU/VPU aggregate revenue accounts for nearly 80% of IP revenue, which is the core source of revenue for the company's IP business. The royalty income of Q3 was 28 million yuan, which remained stable compared with the previous month.
Customization business: mass production business scale and profitability are improving. Design business robust Q2 company chip customization business achieved revenue of 457 million yuan, an increase of 1.0% over the same period last year and 23.4% month-on-month growth.
This is mainly due to the significant growth of the mass production business (+ 37.0%), while the revenue of the design business remains robust. In the first three quarters of 2023, the revenue from 28nm and below process nodes accounted for 85.40% and 55.08% of the company's chip design business revenue. The company's advanced and industry-leading design capabilities bring: 1) maintain abundant orders on hand. By the end of 3Q23, the amount of orders on hand was 2.058 billion yuan, accounting for 78% of orders from customized business. 2) bargaining power and profitability were improving. Gross profit margins of design and mass production business in the first three quarters were significantly higher than in 2022 to 11.8% and 26.8%.
Adjust the target price to 81.73 yuan and maintain the "buy" rating
Taking into account the increase in the company's short-term cost intensity, we downgrade the forecast of annual net profit of homing in 23-24-25 to-1.17 pesque 0.91 million yuan (previous value: 0.76 Plus 1.14 Plus 1870 million), corresponding to the corresponding EPS of-0.23 Plus 0.04 pesque 0.18 yuan. Give chip customization business / IP authorization business revenue of 680 million yuan 12.0x/30.0x PS in 23 years, adjust the target price to 81.73 yuan, and maintain a "buy" rating.
Risk hint: the risk of R & D failure, the process of localization is lower than the expected risk, and the macroeconomic downside risk.